When I reported that FHA was open to broader electronic signature usage last week, it was a fun article to write. Many people have been advocating on behalf of broader e-signature usage. The FHA announcement will strengthen their case. Here’s what a long time e-signature advocate had to say about this news:
“FHA has now given the industry its guidelines for electronically signed documents for closing and servicing and the industry can now do away with every paper document but the Note, once and for all,” said Tim Anderson, director of eServices for DocMagic. “There are no legitimate reasons why the mortgage industry cannot begin originating complete, paperless e-mortgages today. It’s really just an education and implementation issue now, because consumers are expecting and demanding it.”
Fourteen years after the federal government passed the ESIGN Act, allowing for the transaction of business electronically, the IRS, VA and FHA have now all produced their guidelines for the acceptance of electronic signatures. FHA told lenders last week that electronic signatures will be accepted on all documents requiring signatures included in the case binder for mortgage insurance except the Note. As of December 31, 2014, FHA will also accept electronic signatures on the mortgage Note for forward mortgages only.
There are a number of other factors that are also driving lenders toward the e-mortgage. According to the Property Records Industry Association, over 1,056 counties now support e-recording, which represents over 65% of total loan filings nationwide. New federal regulations, such as the QM & ATR rules, require the lender to show proof of compliance if audited, which is more easily accomplished with an electronic loan audit record. Finally, the CFPB’s new disclosure announcement will require lenders to provide the borrower with the opportunity to review the new final closing disclosure three days prior to closing, which is much easier to accomplish if all of the documents are already electronic.
Additionally, new ECOA appraisal rules now require lenders to provide a copy of any appraisal to the borrower promptly upon completion or three days prior to consummation, whichever is earlier. It is going to be very hard for lenders to meet these new disclosure requirements in a paper-based process world.
Let’s hope that lenders get the picture.
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